Ed Steer's Gold & Silver Daily

07/30/2009

Gold spent all of it's time in the Far East and London trading on Wednesday within a couple of dollars of it's opening price, which was around $937. And that's exactly what the price was when trading began on the Comex yesterday morning. But between the Comex open and the London close, gold got sold off to the tune of six bucks. But, like Tuesday, the moment London closed, gold 'fell' another six dollars to its low of the day...but gained most of that back by the close of electronic trading at 5:15 in New York.

But the real action was in the Comex silver pits once again, where silver got sold off another 50 cents during the New York session. Like gold, the bottom was in for silver once the sell-off was over after London had closed at 4:00 p.m. in their afternoon.

The gold and silver charts were interchangeable yesterday, as both looked identical. Here's the Kitco silver chart for the last three days. Silver was smacked for about 90 cents over the course of two trading sessions in New York.



The open interest changes in gold for Tuesday's big down-move were as follows. Gold o.i. fell 8,289 contracts to 386,340...on extraordinary volume of 274,496 contracts. That's monstrous! In silver, o.i actually rose 263 contracts to 97,761...on really big volume as well...25,891 contracts. Both Ted and I were expecting much bigger improvements in both metals, but as Ted reminded me...they can hide anything with spreads and switches...and Tuesday was also option expiry. Today's o.i. numbers for Wednesday's trading should be educational as well. It will also be interesting to see how much of Tuesday's trading activity shows up in tomorrow's Commitment of Traders report.

The Comex Delivery Report showed that 12 gold and 49 silver contracts were delivered yesterday. Today is the last day for delivery into the July contract, as tomorrow [Friday] is the first delivery day for the August contract. Over at GLD yesterday, another big chunk of gold was removed...333,721 troy ounces...more than 10 tonnes. The SLV was, of course, unchanged. In the last six weeks or so, there have been 13 changes at GLD...most of them inventory declines. But over at SLV, there has only been one change during the same period...and that was an increase. Very strange. Over at the U.S. Mint, they reported another 3,000 gold and 85,000 silver eagles produced. And over at the Comex-approved warehouses, another 19,835 ounces of silver were withdrawn.

The usual N.Y. commentator mentioned a couple of things yesterday...the first being "The Gartman Letter closed its gold positions yesterday, which some would see as a necessary condition for a rally." [True enough! - Ed] Then in comments he made early this morning, he said this..."Yesterday, in a clear sign that U.S. Bears are prowling, gold came under heavy selling pressure from the Comex open. August gold closed down $11.90...having been down $13.90 at the low. Estimated aggregate volume was 209,156. [I expect that the real volume figure to be 10-20% higher than that when the open interest numbers are reported later this morning. - Ed] In late morning news, an IMF official had asserted the planned 403 tonne gold sale might be spread over two to three years, and was expected to be in the context of a new Central Bank Sales Agreement. The absence of this agreement is getting curiouser and curiouser. The present one expires at the end of September."

I note that Central Fund of Canada's new Silver Bullion Trust has closed its initial public offering. It appears that they only were able to rustle up US$26 million. This will buy them about two million ounces. I was underwhelmed. The other Canadian silver trust, whose name escapes me at the moment, started up a couple of weeks ago with almost three million ounces. As Ted Butler said yesterday, there is now a glut of silver trusts, and CEF should have done this a couple of years ago. The story on this, posted at marketwirecanada.com, is linked here.

Today's first item comes from the pen of GATA's secretary treasurer, Chris Powell. In his day job, he is senior editor at the Journal Enquirer in Manchester, Connecticut. When Dennis Gartman wrote in his column yesterday morning that he candidly acknowledged that his recent trading recommendations in gold have been precisely disastrous, an awful record much mocked by the 'gold bugs' he loves to disparage...Chris couldn't help himself. It was like saying "sic 'em" to a dog...and he wrote this commentary entitled "The gold market really isn't about you, Dennis". It's certainly worth reading...and the link is here.

The next item is a Reuters story headlined "Gold Tunes Out Weak ETF Buying as Speculation Soars". The reporter, Jan Harvey, says that gold demand is seen leaving the ETFs for the futures market...and the real metal itself. The story is worth reading...and the link is here.

As was mentioned by the usual N.Y. commentator...the IMF has announced how the possible sale of 403 tonnes of their gold will happen..."within a new central bank gold sales agreement being negotiated...and could take two to three years...with the agreement hopefully finalized by October." Here is the short Reuters story where that info came from and is entitled "IMF to sell gold within central bank pact - official". It, too, is certainly worth running through...and the link is here.

And lastly, here is another short Reuters story about central bank gold sales that's very much worth your while to read as well...as it gives the background of the Central Bank Gold Agreement and its current status. Even I learned something from it. I stole this story from Bill Murphy's MIDAS commentary over at lemetropolecafe.com yesterday. The headline reads "Cenbank sales under gold pact well below limit: WGC"...and the link is here.



The world's financial system lies in ruins, as do the fiscal balances of almost every major Western nation, after having to bail out their banks and splashed billions of dollars of rescue money into the broader economy. Everyone is suffering, as unemployment climbs, house prices fall, and companies rack up losses or even face collapse. - Edmund Conway...The Telegraph, London...29 July 2009

So where to from here?

With Chairman Gensler over at the CFTC breathing fire and brimstone about position limits and concentration in all Comex-traded commodities...it's my guess that the bullion banks...led by JPMorgan...the tallest hog at the silver short trough, are starting to head for the exits...and are covering as many shorts as they can along the way. Silver is where they are most vulnerable...as the kind of silver JPMorgan et al would need is not available in size. Sometimes I wonder how much Comex/SLV silver JPMorgan might own itself as an off-setting physical long position against its paper short position. But once I start thinking like that, then I take a pill and lie down until the thought goes away. In case you've forgotten...JPMorgan is the custodian of the silver in the SLV.

Yesterday was as expected...and if the bullion banks follow their Standard Operating Procedure, it's my opinion that we'll see more of this kind of action in the days ahead. But once their done...it's also my opinion [as it is Ted's] that things are really going to get interesting...especially in silver.

See you tomorrow.